Health insurance as a sole proprietor

A sole proprietor is the simplest 1099 case and the one the rules were written for: one Schedule C, one return, the premium deducted against the profit that return reports.

What you are, for this purpose

A sole proprietor (including a single-member LLC that has not elected to be taxed as a corporation) reports business income on Schedule C. Net profit is the ceiling for the health insurance deduction and, after half of self-employment tax and other adjustments, the starting point for the premium tax credit.

Buying the plan

The policy goes in your own name; no business plan is required. Marketplace during Open Enrollment (November 1 to January 15) or within 60 days of losing other coverage; the private market any time, subject to health questions. The premium is the same with or without a licensed agent.

The two numbers to watch

• Net profit: the deduction cannot exceed it, so a loss year means no deduction (the premium becomes an itemized medical expense instead, rarely useful).
• $63,840 (one person) or the household line: above it the credit is zero; retirement contributions and the deduction itself move MAGI, so the line is somewhat under your control.

When the entity question comes up

Electing S-corporation status changes how the premium is handled (through payroll and Box 1), not whether it is deductible, and it does not change the credit. The reason to elect is self-employment tax on profit above a reasonable salary, a question for a tax professional; the health insurance deduction should not drive it. The S-corp owner page shows the other side.